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City Manager Proposes Tax Rate Drop In Budget

OCEAN CITY – A declining housing market mixed with skyrocketing fuel and energy costs are anticipated to affect the resort town in fiscal year 2009, predicted City Manager Dennis Dare in his presentation of the proposed budget this week.

“The budget recognizes we are entering a time of uncertainty. We are faced with rising energy costs. Gas may approach $4 per gallon during the summer driving season. The housing downturn is having a large impact on many people nationwide. These factors, and more, may have an adverse impact on our tourism industry,” said Dare.

Dare touched upon growing fears of a slowed summer, referring to a recent survey which showed that in March 2007, 48 percent of those surveyed had already made vacation plans. In March 2008, however, only 16 percent had made vacation plans.

Ocean City’s proposed budget for fiscal year 2009 shows an increase in revenues and expenses, with revenues increasing from $75 million in 2008 to $80 million in the proposed budget for 2009. Expenses also reflect an increase, from $69 million in 2008 to a proposed $74 million in 2009.

Energy costs aren’t the only area reflecting an increase; the town will be absorbing increasing insurance costs as well in 2009. Employee health premiums will rise 12.22 percent, or $550,000, in fiscal year 2009. To offset increases, employee co-pays will increase and generic prescription use will be encouraged.

The economy will also affect employment growth in FY09.

“Given the economic uncertainties and no new initiatives, this budget does not call for any increase in the number of employees,” said Dare.

Previously planned efforts to increase tourism through advertising will go into affect in the upcoming fiscal year. Advertising will more than double from $1.7 million to $3.6 million this year through the raise in the room tax in January 2008 from 4 percent to 4.5 percent.

Various projects will continue through the upcoming year, with $1.2 million slated for roadway paving. Expansion of the Public Safety Building will be completed soon, along with the design work for the Downtown Park, between 3rd and 4th streets. Design work for St. Louis Avenue is also underway, with plans to underground utilities and streetscape the avenue.

The FY09 budget shows a proposed $1 million in capitol improvements. Bulkheads on South Ocean Drive, Old Landing and Robin Drive, design services for canal dredging, and a new uninterrupted power source for the Public Safety Building are a few of the items included.

“Revenues are projected to go down by $560,000 in Planning and Zoning for building permits and Fire Marshal reviews because of the downturn in construction,” said Dare. “We also anticipate decreases in Highway User Tax, Income Tax and Project Open Space monies because of the decline in the economy.”

The property tax rate will not see an increase in FY09, rather the rate will decrease from 41 cents per $100 of assessment to 39.5 cents.

“The assessed valuation of real property in Ocean City has increase from $10.5 billion to $11.7 billion. The current tax rate of $0.41 would have to be lowered to $0.35 to produce the same $41.8 million in revenue,” said Dare.

Assessments will be revised in Ocean City in the upcoming year.

“It is reasonable to expect some assessments to decrease to reflect the actual market conditions,” said Dare.

Residents will continue to enjoy the Homestead Tax Credit, according to Dare, which saves $1.45 million or about $500 per resident.

Budget meetings will be held for all departments over the next few weeks, concluding with a first reading of the budget before the Mayor and City Council on May 19 and a second reading on June 2.